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Rich investors to buy extra shares without CMA approval

Capital Markets

Rich investors to buy extra shares without CMA approval

Thursday April 20 2023

The National Treasury building in Nairobi. FILE PHOTO | NMG

Investors will be free to buy stakes of up to 30 percent in listed companies without the approval of the Capital Markets Authority (CMA), raising the threshold for notifying the regulator of a potential takeover.

The Treasury is seeking to amend the regulations guiding takeovers in changes that will raise the limit for seeking approval for share purchases from 25 percent.

Presently, the regulator requires investors who own more than a quarter of a Nairobi Securities Exchange-listed firm to state whether they intend to take full control when buying stocks equivalent to at least five percent in it.

The investors are allowed to seek regulatory exemption from the complete purchase of the company. The law also provides that investors who own more than a quarter of a listed firm must seek approval when purchasing extra shares equivalent to at least five percent shareholding within a year.

Read: CMA issues four licenses to financial intermediaries

The Treasury is seeking to raise the threshold to 30 percent, allowing investors to acquire additional shares without regulatory approval.

“Effective control (shall be attained) where a person proposes to acquire any shareholding of thirty percent or more in a listed company,” say the draft regulations.

This means a wealthy individual such as Jimnah Mbaru who held a stake of 7.72 percent in Britam as of the end of 2021 can raise his stake in the company up to 29.99 percent without notifying the CMA.

Equally, the Kenya Development Corporation can raise its stake in Centum from the current 22.97 percent to just under 30 percent without notifying the CMA.

Between September 2013 and August 2015, the late Chris Kirubi had to seek the CMA’s notification and exemption to increase his stake in Centum from 24.99 percent to 29.99 percent in a deal that was worth more than Sh1 billion.

The billionaire in 2020 also sought the CMA nod to buy an additional 20 percent stake in Centum in a deal worth Sh2.7 billion, pushing his stake to 49.99 percent.

“The public is hereby notified that … Capital Markets Authority has granted Christopher Kirubi an exemption from making a mandatory takeover offer in the event that the shareholder makes any acquisition of up to 49.99 percent of the ordinary shares of Centum,” Mr Kirubi said in a press notice.

This meant that he only intended to raise his stake but not make an offer to take full ownership of the company.

Mr Kirubi died in June 2021 and his family did not press on with the deal. The Kirubi family owned 30.94 percent of the investment firm at the last public filing in March last year.

The proposed takeover regulations have retained the clause that demands investors with a stake above 50 percent stake in a listed entity notify the CMA of every additional share.

UK brewing giant Diageo and Stanbic Africa Holdings Limited sought the CMA’s exemption from full takeovers when increasing their ownership in East Africa Breweries Limited (EABL) and Stanbic Bank Kenya respectively.

Diageo owned 50.03 percent of EABL and increased the stake to 65 percent in March while South Africa’s Standard Bank, through Stanbic Africa Holdings Limited, grew its ownership in Stanbic Bank Kenya to 74.92 percent from 60 percent.

An investor who acquires a stake of more than 30 percent is assumed to have gained effective control of the listed company under the proposed regulations and will be required to disclose the transaction within 24 hours of the resolution.

Read: How investors are protected in Kenya's capital markets

Besides notifying the CMA, the investor will be required to alert the Competition Authority of Kenya (CAK) if the share purchaser has a significant holding in a rival company.

The proposed regulations have retained the clause that empowers investors who cross the 90 percent ownership to forcibly acquire the remaining shares.

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